FFCRA COVID Sick Pay and Employee Retention Tax Credit Update

Mike Hayden

Recent updates to the CARES Act provisions have been made that affect the FFCRA COVID-19 Emergency Paid Sick Leave (EPSL) and the Employee Retention Tax Credit (ERTC). Here is a summary of both these important tax credits.

FFCRA COVID Extended Sick Pay

The recently signed Consolidated Appropriations Act, 2021, extended employer tax credits for paid sick leave and expanded family and medical leave voluntarily provided to employees until March 31, 2021. However, this Act did not extend an eligible employee’s entitlement to FFCRA leave beyond December 31, 2020.

This means that it is now optional for employers to pay employees the 80 hours of COVID-19 emergency paid sick leave, and the extended paid family leave of 12 weeks, beyond December 31, 2020. This new provision extends through March 31, 2021. Another provision included is that employees are not given additional sick or family leave time beyond the 80 hours if they have already used some or all of the paid sick leave. They are still capped lifetime at the original limitations.

We recommend that you continue to pay employees using the COVID paid sick leave, should an employee become eligible, but employers will need to make this decision on their own based on business conditions. Whatever direction you decide, be sure it is consistent for all employees.

Employee Retention Tax Credit (ERTC)

We sent limited information on the ERTC earlier this week, but wanted to expand on this, as it may be a great opportunity for restaurants, or any other business that has experienced a significant decline in revenue for any quarter in 2020 as compared to 2019.

The ERTC was part of the original CARES act which would have ended December 31, 2020 but has been extended and updated for 2021.

Original ERTC Rules

Originally, the ERTC provided a fully refundable tax credit equal to 50% of wages paid to employees up to a maximum amount of $10,000 per employee, per quarter. Only businesses that experienced a decline of 50% or more in year over year revenue or had partial or full suspension of operations due to COVID-19, and had not opted for the PPP loan, were eligible.

New ERTC Rules

The updated ERTC now includes a fully refundable tax credit equal to 70% of wages paid to employees up to a maximum amount of $10,000 per employee, or to a maximum of $14,000 for Q1 and Q2 of 2021. Additionally, eligibility has been expanded to now include businesses that have experienced a revenue decline of 20% quarter over quarter 2019/2020, or more and/or have experienced a partial or total shutdown of operations.

PPP or ERTC? You Must Choose!

It will be important for any business considering the ERTC credit for 2021, that they analyze whether the new PPP loan for 2021 or the ERTC will be the best path to take for their business.

Retroactive ERTC for 4Q 2020?

It may also be possible for a busines to claim credits retroactive to the 4th quarter 2020, for wages not already covered by PPP loan funds since the update lifts the ban on employers using the ERTC if they already had a PPP loan in 2020. Be careful that you are not double dipping though. The IRS will be issuing more guidance on this shortly.

Confusing Times!

These are confusing times indeed. Between the FFCRA, expanded PPP, ERTC, Cal/OSHA regulations, and simply trying to run our businesses, we all have our hands full. Just know, we’re here to help at Infinium HR. We do advise you to consult a tax professional to determine your eligibility, but we can assist with the process of applying for credits or adjusting 941's.

You have enough to worry about, just contact us for assistance and stay tuned for updated information.

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